Goldman notes optimism over political change is trumping economic concerns, given what the bank says are expectations that the opposition Bharatiya Janata Party, led by Prime Minister candidate Narendra Modi, could prevail in Parliamentary elections due by May 2014.

Goldman also notes that external capital account pressures have moderated for now, and cites signs of a cyclical pick-up and structural improvements in the economy.

The investment bank likely notes the earnings outlook is stabilising, while noting that retail redemption pressures could moderate, among the factors behind its upgrade.

The U.S. bank also included some mid-cap infrastructure stocks which are trading at inexpensive valuations such as Adani Power, NHPC Ltd, Materials stocks like Grasim Industries, and industrials stocks like Container Corp of India and Adani Ports and Special Economic Zone.